It was only a matter of time before the digital revolution and
the Internet took aim at the photo processing market. After all,
according to Andy Grove, one of the founders of Intel Corp., any
information that can be digitized will be digitized.

One of the first companies to establish a beachhead in this,
well, developing market was Herndon, Virginia-based PictureVision
Inc., co-founded by Phil Garfinkle, Yaacov Ben-Yaacov and Elliot
Jaffe. The trio met through a joint venture between an American
company where Garfinkle was employed and an Israeli technology
company Jaffe and Ben-Yaacov worked for. With PictureVision
technology, consumers can share, manipulate and store photographs
on the Internet.

To develop and roll out this kind of service takes capital, and
plenty of it. The sheer excitement and size of PictureVision's
market made the always-difficult task of raising money to fund the
business somewhat easier. Since opening its doors in late 1995,
PictureVision has raised $9.3 million, with more deals in the
pipeline.

Very early on, the partners knew PictureVision was on an initial
public offering (IPO) track, says Garfinkle, whose previous
position was with a public company. "An IPO is the only way we
can access the volume of capital we need," he says, adding
that outside of an outright acquisition, an IPO would be the only
way for early-stage investors to cash in on their investment. So,
with a public offering looming in what Garfinkle and his partners,
investors and employees hope is the not-too-distant future,
PictureVision has started to clean house and position itself for a
major-league debut.

Unfortunately, according to Glenn Bierman, founder and chairman
of Tycon Equity Partners LLC in New York City, companies sometimes
fail to bring their offering to fruition simply through lack of
proper planning. Bierman should know: As an investor in many
early-stage companies, his company's ultimate return depends on
the ability of the companies it invests in to go public. "One
of the most important strengths we bring to the table is helping
companies structure and present themselves in a way that will be
attractive to the capital markets," Bierman says.

What follows, according to Garfinkle and Bierman, are strategies
and tactics entrepreneurs must consider now if they think
there's an IPO in their future.

Break out of the box. It goes (almost) without saying
that every company looking toward an IPO must build a strong
management team. And if you are dead serious about building the
kind of company that investors will stake millions on, says
Garfinkle, you've got to be willing to hire outside of your own
network.

For many emerging growth companies, Bierman says, an
underwriter's decision about whether to do a deal hinges on the
team they'll be turning the capital over to once it's
raised. "Ideally, you want a team with lots of industry
experience that can walk into a room and take command of it,"
says Bierman. In most cases, the reasoning goes, those names are
not lurking in a small-business owner's Rolodex.

For Garfinkle, finding this kind of talent meant retaining
professional search firms to fill key posts in marketing and
executive management. If you don't have the funds for a search
firm, running ads in national trade publications is another good
way to find employees who can bring new thinking to the table.

Enlist top-flight accountants. According to Bierman, the
best accountants for companies considering an IPO come from the
so-called Big Six firms. "The reason is simple," says
Bierman. "When you're ready to go public, you want to
instill confidence in investors, and by and large, investors
universally trust the Big Six." Moreover, he adds, while
regional or local firms may have the same skills and talent their
larger bean-counting brethren do, IPOs are generally sold
nationwide, and only the Big Six have national name
recognition.

Perception aside, there are several technical aspects of
financial accounting that must be addressed early on. For instance,
issues such as how to recognize revenue, whether to keep books on a
cash or accrual basis, and whether to record investments in
research and development as an asset or an expense are policies
that will be scrutinized when a company files to go public.
"If these are not right from the start, it causes
delays," says Bierman. "And nothing kills an IPO more
quickly than unexpected delays in the process."

Build a board. Investors want to see a board of
directors that will help a newly public company make sound
decisions. As a private company, you can build a board of directors
in which you have confidence. Garfinkle says that entrepreneurs
must also build a board of directors that has confidence in you and
can help maximize the company's value for the public
shareholders. PictureVision is now bringing in board members who,
while outsiders to the company, have broad-based industry
experience in photography, the Internet and
telecommunications.

"For companies on an initial public offering track, the
board's relationship with the founders becomes a two-way
street," says Bierman. "Not only do the founders have to
be comfortable with the board, but the board must be comfortable
with the founders since collectively, the board will be accountable
to public investors for what senior management is doing with the
company."

Grow up. Tiny or early-stage companies tend to enter
into relationships on a handshake and a hope. Operationally, this
may work out fine, but it won't survive the scrutiny of an IPO.
"You might work out deals where some customers get certain
benefits that others do not," says Garfinkle.
"Unfortunately, what the underwriters and the attorneys want
to see are standardized procedures and contracts so that everyone
is equally protected."

This idea extends beyond agreements with suppliers and vendors
and, ideally, applies to virtually every aspect of the
company's life. Independent contractors, for example, are most
often converted to employees because this gives the employer more
control and less chance of problems with the IRS. And rather than
telling employees to sink or swim, performance reviews become
standard operating procedure. Patents and trademarks, rather than
simply being discussed, are applied for and vigorously
protected.

Set up benefit plans. Most high-octane companies run on
people. But you can't possibly hope to attract the strong
talent you need without a benefit plan. Of these, the most
important is an employee stock option plan. "As a growth
company, you might not be able to match the salaries offered by
more established ones," says Garfinkle, "but you can
bridge the gap by offering potential employees the opportunity to
cash in on the future."

While stock option plans are important for the rank and file,
Bierman says they are a must for the senior-level people a company
needs to recruit. "Many times the senior management that we
recruit for companies have had prior successes, so they aren't
looking for the big salary as much as they are the large upside
potential that can come with options or other forms of equity
participation."

Build bridges to the financial community. As
PictureVision has grown over the past several years, Garfinkle has
spent more and more time networking with members of the financial
community. "I've been working with investment banks and
their analysts," he says. "Believe it or not, many of our
potential customers call these analysts to find out about us. In
addition, though our transaction may be down the road and we
haven't yet selected our investment banker, we can use this
time to figure out who the best partner is for
PictureVision."

But there's more. Bierman says the other piece of the puzzle
is that analysts and investment bankers can give you feedback on
business models. "A lot of analysts help you wear binoculars
by alerting you to trends in the industry," he adds.

Building bridges to the financial community can take time,
Garfinkle says, because it's often difficult to get to the
senior-level investors who are interested in your particular kind
of company. But ultimately, to make money, investment bankers must
do transactions, which means they're always looking for
prospective candidates. The entrepreneur's task is to convince
the investment banker his or her company can go the distance and
that it's worth their time to develop a relationship.

Hire good help. Some of the most challenging aspects of
preparing for an IPO relate to personnel, says Garfinkle. The
migration from a start-up to a high-growth enterprise means that
entrepreneurs must constantly realign personnel into more narrowly
defined responsibilities. "That's a significant
challenge," Garfinkle says. "My advice: If you can afford
to, hire to meet the needs of the business you anticipate
generating, not the business you're currently
generating."